Tips when buying and selling

HOSTS Alec Renehan & Bryce Leske|8 January, 2020

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Now that you’ve found a company you’d like to buy, there are a few things to consider when buying, and selling.

In this episode you will learn:

  • How do I then buy the shares?
  • How do I sell the shares?
  • Types of orders; what are they and what’s their purpose: market order, limit order and stop order
  • How do I know when is a good time to buy?
  • Dollar cost averaging
  • How do I know when is a good time to sell?

Want more? Subscribe to Equity Mates Investing Podcast, social media channels, Thought Starters mailing list and more here

Bryce: [00:00:32] Welcome to get started, investing a whole series of lessons to help you on your investing journey. This is for anyone who wants to start investing but really isn't sure where to start. Our aim is to make markets as accessible as possible for you. I am here, as always. Joined by my equity buddy Ren. How's it going, bro? It's very good, Bryce. Glad to be with you again. [00:00:53][21.2]

Alec: [00:00:54] We are now well and truly buying and selling were off to the races, which is an exciting time for everyone. [00:00:59][5.2]

Bryce: [00:01:00] Yes. So speaking of buying and selling, that is what we are going to be talking about today, Ren. So we have gone through the initial stages of building the foundation. We've found some indexes that we want to buy. We found our broker. We've found some direct companies that we want to buy. We've gone through the research papers. We've been inspired. And now I guess it's actually down to the nitty gritty of actually pressing the button and making the trade. Yeah. So there are a few things to consider when it comes to buying and selling. In today's episode, we're going to have a look at what they are and what they mean for your portfolio. [00:01:33][33.2]

[00:01:35] So tips on buying and selling Ren before you get into the tips. [00:01:38][3.3]

Alec: [00:01:38] Let's start with the basics. At this stage, most people will have bought an index or will it will be looking to buy an index. They will have chosen a broker. So there should be a basic idea of the mechanics. But is there any key pieces of advice that you have around the how of the buying and selling? [00:01:55][16.3]

Bryce: [00:01:56] So I guess, yeah, I want to just start we get some questions in around what sort of orders? You know, people get confused with that sort of stuff and and what should I be typing in? So I just want to bring it right back to the basics. So let's assume I've got five hundred dollars that I'm putting into a stock simply through your broker. You're going to search the ASX ticker code, which is usually a three letter code. You select your stock and then there'll be a buy or sell button, assuming you want to buy it. You very simply just click on that and then we'll bring up a whole heap of options. Generally, what you need to decide is are you going to be buying the quantity of shares or are you going to be buying a dollar value of shares? So if I have 500 dollars, I would go for the dollar value of shares and the broker should then tell you how many shares you can essentially buy. So let's say the shares are ten bucks, then you're going to be out of buy 50 shares. [00:02:49][53.2]

Alec: [00:02:50] But if the shares are nine dollars and you only have 500, then you will be able to buy housing that you'll be able to buy, what, forty five or thereabouts. Yeah. That keeping is you won't be able to spend your full five hundred dollars with most brokers, with most broker because you need to buy full shares. Correct. So if I simplify the maths a bit, if you have 10 dollars and you want to buy a company and its shares are trading at four dollars, you can buy two full shares. Yeah. Eight bucks. Yeah. Two left over. So you can't afford a third. That's right. Yeah. [00:03:26][36.1]

Bryce: [00:03:27] Now something to consider as well. Is your brokerage when it comes to buying and selling. If you have five hundred dollars flat, generally that is the minimum that you need to buy a full set of stocks through some of the major brokers. Now you can find other brokers. That will be less than that, but your brokerage will come out of that five hundred dollars. So that means if your brokerage is ten bucks, for example, you only actually have four hundred and ninety dollars to invest. So remember that when you go to buy your first stocks, you have 500 plus whatever your brokerage is going to be so that you can still meet that minimum requirement. Yeah. Now, Ren, when I put in I want to buy five hundred dollars worth, it will tell me that I can buy 50 shares and then I can hit Ordan now essentially. [00:04:10][43.0]

Bryce: [00:04:10] Yes. Now what is generally going to happen is the default order will be what's called market order. And all that is, is your saying I'm happy to buy these stocks at whatever price the market can get them for me. [00:04:23][12.2]

Alec: [00:04:23] And to be clear, that means if our photos stock who are trying to buy rockets up to eight dollars, then the brokerage platform that you put the trade in will. So they told me to buy it at whatever the market prices on buying. [00:04:36][12.7]

Bryce: [00:04:37] Correct. So so what's happening in the background is your broker is going out and saying, hey, prices here and he wants to buy 50 stocks of Apple, who is willing to sell me 50 stocks of Apple. And so they will go out and find that person. And then there will be a negotiation of price. [00:04:53][16.3]

[00:04:54] This is all happening, obviously, very, very, very quickly. [00:04:57][3.2]

Bryce: [00:04:57] And that negotiation of price is then the price that you agree on, and that's what you'll buy. So you might put the trading in at the time. Apple is ten dollars. And by the time you put the trade in stocks going up, more people want it. The demand is there. That's a person saying, hey, well, I'm going to. I won't actually sell it for ten dollars and two cents. You might say that when you get your order slip through that you've actually bought it at ten dollars and two cents, which is fine if that's the way that you want to do your order. [00:05:23][25.7]

Alec: [00:05:24] So the flip side, when you're selling it, same process, same. [00:05:28][4.4]

Bryce: [00:05:29] Process. So you can obviously decide if you want to sell all of your stocks. You can decide if you want to sell half of them. And away you go. But, yes, the same process goes if you want to sell your Apple stocks, they've gone up to 12 dollars. So you've made tootle as a stock. You can put in a market order. And yes, you might sell them for 12. But, hey, someone might be out there wanting to buy them at eleven dollars, 40 or 50. So you might sell them at eleven point forty fifty, if that's what the market determines. So you do lose a bit of control over the pricing with a market order. [00:05:57][28.8]

Alec: [00:05:58] And I guess you the reason you would do it that way is efficiency. [00:06:01][3.4]

Bryce: [00:06:03] That's right. If you want to buy the stock right now. Well, as quickly as possible then the market order is the best way to do that because you're more likely to find someone wanting to buy or sell at a reasonably close price to what you're putting the order in. Than if you were to do other order types where you want to buy at precise prices. [00:06:20][17.4]

Alec: [00:06:21] So you've alluded to these other orders. So let's let's take the anticipation out of it. What are some of the other types of orders that I could put in if I didn't want to just say, give me the market price? [00:06:32][11.3]

Bryce: [00:06:33] So when yours, for example, buying in put in a limit order. And essentially what that means is you're saying that I'm willing to buy this stock. So let's take Apple as another example. At ten dollars, you might put in your limit at ten dollars fifty. And what you're saying is, I'm willing to buy this stock from whoever it is up to the value of ten dollars 50. So you then choose limit, you then put in ten dollars 50. And I want to buy five hundred dollars worth up to the value of ten dollars fifty click submit. And that order will generally sit there until they find someone to buy it at ten point fifty. Some of them expire at the end of the day. Some of them, you know, can roll on until that order is filled. [00:07:16][43.3]

Alec: [00:07:17] And similarly, when you're selling it, you say, I want to sell, but I don't want to sell it below this price. And so then it will try and sell it. But if the stock drops below a certain price, then it will stop trying to sell it. [00:07:30][12.9]

Bryce: [00:07:30] Yeah. Yeah. So that's called a limit sell. Yes. So let's move on to stock. So stop loss Ren is an order that you can put in when you're selling, and it's a way that you can limit your downside. So say I buy Apple for ten dollars again. I can then put in an order that says I want to sell Apple if it drops to nine dollars 50. And limit my losses to 50 cents per share. Now, that is a good way to, I guess, not have to worry about looking at the stock every day. That order will generally sit there until Apple does hit 950 and then it will sell and you've limited the amount you lose. Caveat on that is, though, that if the stock drops incredibly quickly and the market can't find someone to actually buy it at 950, that order will probably fall through. [00:08:17][47.3]

Alec: [00:08:17] Yeah. So I think let's just pause for a moment and go back. So there are three types of orders that most brokerages will offer you and that you could put in. Yes. The first one is a market order. That's the most common. And you get the price per share that the market is. The next one is the limit order. And that one, you take a little bit more control over the price that you pay or the price that you're selling. The caveat is it's harder for your broker to then feel that or yes, takes longer, because if there's no one on the other side that's willing to, say, sell you the shares at that price or buy the shares off you at the price that you want, then they're not going to be able to fill the order for you. Yeah. So your sacrificing efficiency for a little bit more control over the price. So that's the second one limit. The third one was what you touched on then was stop loss. Now, this is a really useful tool. Maybe the best way to think about it is not that you're putting an order in to sell, but you're you're basically putting safety blanket over your trade. And you're saying if the stock falls to a certain level, then trigger a sell order. So if the stock goes up, nothing will happen. It will just sit there in the background. But it's a safety blanket for you. [00:09:30][72.5]

Bryce: [00:09:30] And to your point, Ren, if your stock is going up, you can adjust that order as you go. So that if it goes up, say, 50 percent, you can adjust that stop loss to capture almost those profits that you've made in your Apple example if you use real numbers. [00:09:44][14.0]

Bryce: [00:09:45] So I buy the stock at ten dollars 15. It comes into my ownership. I then go back into my broker and I say I'm going to put in an order or a safety blanket at nine dollars 50 and it will sit there, say my Apple stock then goes to 12 dollars. I've made a 20 percent return. I then can move my stop loss from 950 to, say, 11 dollars so that I know. Okay. Well, at most I'm going to lock in that 10 percent profit. Yeah. [00:10:11][26.1]

Alec: [00:10:12] Yeah. Nice one. I think one thing that's important and I know I had questions about when I started investing was there are times, regardless of which order you put in, it won't get filled. And that's that's not because you've done any. Being wrong. That is literally because there has to be another person on the side of the trade. If you want to buy something, it doesn't mean you automatically can get your hands on it. Yeah, you need to be able to be matched with someone who's selling it. And similarly, if you want to offload a share, but no one is willing to buy it off you. Too bad. I'm sorry. You're stuck with it. Yeah. It's not there's not just this, like, nebulous market that things disappear into. Yeah. Is has to be someone on the other side of the trade. [00:10:59][47.1]

Bryce: [00:11:00] So the markets in Australia are open from 10:00 a.m. until 4:00 p.m. That's the trading time. So they're certainly not working your average nine to five. That's for sure. I think they probably have to do some work around. So markets open at 10 a.m. and they shot at 4:00. So your window to trade is not limited to that, though, but your trades will only be executed during 10:00 a.m. and 4:00 p.m.. So say if I get home from work, I haven't had time to actually look at the stocks for the day. [00:11:30][30.6]

Bryce: [00:11:31] I want to do a bit of research and I come across Amazon and I think I'm pretty keen to invest in Amazon 10 p.m. at night markets aren't open. Is that a reason for me not to put in a trade Ren? Can I still do that? [00:11:42][11.5]

Alec: [00:11:43] You can, especially cause Amazon is not traded in Australia. [00:11:46][2.5]

Bryce: [00:11:47] True. Okay, well, let's bring it home then. Harvey Norman. Yes. Yes. [00:11:50][2.9]

Alec: [00:11:51] You can put a trade in at any time and it will sit there and then when the markets are open, it will try and fill it up. Your broker will try and fill it. [00:11:58][7.1]

Bryce: [00:11:58] Yeah. So you can put in orders whenever you like. Don't get caught out though. If if your putting in an order and you know, this goes back to the market order, if you've put in a market order and it's seven dollars, for example, that stock could open the next morning at 10am at ten bucks because overnight some information has come through and everyone wants to pile into the stock. [00:12:21][22.6]

Bryce: [00:12:21] So you may well be buying that stock at the very peak on day one. [00:12:26][4.1]

Alec: [00:12:26] So let me let me ask you personally, when youre putting a trade in. What do you do? Do you say just market order or do you two limit orders? [00:12:34][8.1]

Bryce: [00:12:36] I would. I used to always put in market orders because I really didn't know how to use limit orders and I really didn't understand the impact that it can have if you get it wrong. If that makes sense, I'm sorry, not wrong. But if you didn't really understand the implications of a market order as we've as we've discussed, so I've moved more towards limit orders where I can. But if it's, say, an ETF very long term, then I'll stick with a market order just because I want it filled. But I have stopped losses on almost everything, so I'm actually the complete opposite. [00:13:09][33.7]

Alec: [00:13:10] When I started, I had the thought that, you know, it's my money. I want to have a lot of control over what I pay for it. And so a lot of the time I would set the limit. I would set the price on what I'm willing to pay more and more these days. [00:13:22][12.1]

Alec: [00:13:23] I'm of the opinion that if something's a good trade at ten dollars, it's a good trade at ten dollars fifty. Yeah. My margin of error is never and should never be so thin that the ordinary movement of the market in day to day trading should move it from a good investment, from a bad investment. So I'm much more open to doing just market orders and just taking whatever the price the market is giving me. There's a few trades I've tried to make where I put a limit order on and then I missed out and I missed out on a movement that would have made me money. So I am much more of the opinion that I just want to get into the position. I've never had a big jump against me, though, so that would probably change my opinion if that happened. [00:14:10][47.2]

Bryce: [00:14:11] Do you generally place trades during market hours or when markets are closed? [00:14:15][3.8]

Alec: [00:14:15] So I find it really difficult to watch the market during the day just because of how we both work day jobs outside of this podcast. And I don't really have the opportunity to watch the market, so I am almost completely oblivious during the day. Yeah. [00:14:32][17.1]

Bryce: [00:14:33] So you're a you're a night-time order place. [00:14:36][2.9]

Alec: [00:14:36] Yeah. And weekends and on weekends. Yeah. Which is good in a way because it means that you don't see a lot of the noise day to day. But it just also. Yeah. You just. Yeah. You miss out I guess. [00:14:47][10.4]

Bryce: [00:14:47] Yeah. So those are probably the key points to consider when you're buying and selling. Looking at sort of the order type that you want to consider. You can buy at sort of any time during the day. But just be aware that your orders will only be filled during Monday to Friday, 10 a.m. to four PM. [00:15:03][15.4]

Alec: [00:15:03] Yeah. I just saw one more thought about stop losses. Yeah, but it's a natural tendency of people to set them really tight. Yeah. So you buy a stock, you know, your Apple example, buy the stock at ten dollars, you might set it at nine dollars fifty and say you like. Or then if it starts going down a tiny bit, I'll be protected. You've got to remember that stocks move and stocks move, you know, up and down. And if you set it so. Like so close, close to the price you bought it at. It may go down a little bit, but then a few days later it may go up a lot. And so you need to give some you to give some slack in that Stop-Loss. [00:15:38][34.7]

Alec: [00:15:39] So the ordinary day to day movements of the market don't mean that you're automatically out of a position that over the long term does very well. [00:15:47][7.9]

Bryce: [00:15:47] And there is a whole science around figuring out what that. But there is that daily moving every line. Let's not let that's something for get started with advanced investors. [00:15:57][9.4]

Alec: [00:15:58] Yeah. Really stuck into investing with equity mates. Something that I haven't even nailed. [00:16:01][3.5]

Bryce: [00:16:01] But yes, definitely I'm very interested in that space. [00:16:04][2.2]

Bryce: [00:16:05] So Ren, the final two questions that we want to address in this episode are ones that we often get asked and that is the how do I know when to buy? How do I know when to sell? Now, if everyone knew the answer to that question, then we'd all be millionaires and not working. And day today, nine to five job. So I guess the short answer is there's so many different ways to determine when is a good time and when is a bad time to sell and also buy. And it really gets comes down to your strategy. I think we're going to have quite different opinions on this. I don't think so. I think sell will be the same. So should we start with when to sell? [00:16:41][36.4]

Alec: [00:16:42] No, let's start with when to buy. Let's do it in order of how it would happen in people's lives. Okay. Do you want to kick it off? [00:16:48][6.6]

Bryce: [00:16:49] Yes. So I have a couple of different ways that I look at this. [00:16:52][3.3]

Bryce: [00:16:53] Generally speaking, I don't really sort of try and time the market at all. If I if I am buying into an ETF that is, you know, an index of the ASX 200, then not considering the broader market at the moment, I don't really try and time it at all. I feel like the trade off buyer, obviously, considering where the market is at at the moment, that's sort of what makes me generally consider, but not on a day to day basis. I sort of look at it. Is this generally the time to buy within, you know, these these months that we're in, if that makes sense? But then I do look at momentum as a indicating factor in some of my sort of direct company trades. And I use that as a as a leading indicator for me as to when is a good time to buy. As we've discussed, momentum being the demand and the money and the type of money that's coming into a stock, is that in favour? And I use that as a way to try and maybe time my entry into a stock. [00:17:46][52.9]

Alec: [00:17:47] Yeah. So I think, look, there's obviously a reason that people use momentum. It obviously works. [00:17:53][6.3]

Alec: [00:17:54] People make a lot of money doing it. For me, it's not something I concern myself with. I think the meat of the analytical work is done in. Is the trade good? Is the company good? And I think. There's a saying time in the market, it's timing the market, and I think that is very applicable to any trade, really you're worrying about. You know, maybe a few percent here and there on when you're buying it. But what you may miss out on is bigger moves in the share price. And so I think for me, I am not trying to hold something for a day or a week. I am trying to like just temperamentally and how I work as a person and as an investor is I want to find things that I can hold for a long time. And for me, then the you know, the percent here or there when I'm buying into the stock isn't worth me losing whatever hair I have left. I would much rather just get into that position and just hold it. [00:18:54][59.5]

Bryce: [00:18:54] So I think it's pretty clear that there is no hard and fast. You know, these are the key indicators for when to buy and sell. It's very much based on your your strategy. And we'll get to sell in a second. Sorry. Buy. You know, if we're talking about growth, you might be looking at their earnings updates. You might you might be using those as key indicators of when to buy. But yeah, to your point, Ren trying to time the market itself is difficult, so probably don't get too caught up on that, especially as as a beginner, looking back to my investing history, it was definitely one of the key questions I had. [00:19:27][33.1]

Alec: [00:19:28] How do you know when the right time to buy is? Because there's so much movement day to day that creates this perception that you need to be an expert to understand those movements. So then buy in at the right time. But I think the simple fact of the matter, especially when I was starting out as a beginner, what I would have loved to just know is just cut out the noise and get in. If if the company is the right company, the day to day movements are unimportant. And so I think as I get more experience, obviously, as you've got more experience, you've got more into momentum. And that might be something that I take an interest in later in terms of expanding my skill set. But I think if we think back to where we were a few years ago, getting hung up on timing, the perfect entry is probably not wasn't a good use of our time. [00:20:19][50.9]

Bryce: [00:20:20] Agree. And maybe a practical tip that you could try to use is to almost forget about the price while you are doing some research on the company. If your gut is telling you that you actually really like this trade, you like this company, you think it's got great growth potential. It's a good industry. If you didn't know the price, would you put money into it? Yeah. And if the answer is yes, then perhaps just do it. Yeah. To some degree. Some day to some degree. But don't get caught up on that daily movement of price and think if if we're not to since today then tomorrow two cents as well. [00:20:54][33.9]

Alec: [00:20:55] There is always a price when something is too expensive, of course anything. But it's a bit different to the day to day fluctuations. Yeah. Yeah. I think it's before we get onto selling. I want to introduce a concept which I think is really useful for all investors, not just beginners, but it takes away the concern around timing the market perfectly. Yeah, and that concept is dollar cost averaging. Yeah, nice. [00:21:17][22.5]

Alec: [00:21:18] And so for people who are unfamiliar with the term, what it means is that rather than taking a big chunk of money and putting it in right at the start, what you do is you spread out when you're buying over a long period of time. And so as the stock price fluctuates day to day, month and month, week to week, whatever it is, you're just putting in a consistent amount over a longer period of time. And it means that sometimes you might be buying it when the price is a bit higher. But other times you're buying it when the price is a bit lower and you just put the consistent amount of money in. And so over the long term, it means the average price that you're buying. It takes away the day to day fluctuations of the share market. Where dollar cost averaging is really useful is for people who are earning a salary and just saving a bit from their salary. And what it means is that as money's coming in and they're putting some side investing, they then put that into the market. And naturally, then they're avoiding the highs and the lows of the stock market. And they're just consistently putting stuff in over a long period of time. [00:22:22][64.5]

Bryce: [00:22:22] Absolutely. Yeah. Really important concept to understand. It really feeds into that compounding that we've been speaking about. It really takes away the need to worry about price because as you said, Ren, you end up getting the average price over a longer period of time. One thing to consider with dollar cost averaging is the frequency with which you do it and the brokerage that you pay every time you do do it. But there are a lot of products out there now that allow you to dollar cost average at relatively cheap prices. But I completely agree with you ran as a beginner investor. It's an awesome concept to try and bring into your strategy. Consistency, same amount, same time every time. [00:22:59][36.8]

Alec: [00:23:00] And I think to play it out with your your Apple example again. So let's say the stock is at ten dollars, but over six months it fluctuates between twelve dollars on the expensive side and eight dollars on the cheap side. You're not going to know why those fluctuations are whether natural high in the natural low is. But you just know that is going to. It is going to keep moving. Day in, day out. And so rather than taking your lump sum at the start and putting it in at whatever price it is on the day that you have that money, you consistently buy, you know, maybe a chunk of money once a month over that time. Sometimes you buying it at twelve dollars, which is expensive. And with that chunk of money, you get less shares. Sometimes you buying it at eight dollars where it's cheaper and you actually get more shares with that chunk of money. But over the long term, your average buy price is somewhere around that terminal. And so it just takes away the highs and the lows. [00:23:54][54.3]

Bryce: [00:23:54] Absolutely. Righto Ren. Well, we've discussed buying. So let's talk about how do we know when it is a good time to sell? And I think we will probably both agree on this. Okay, well, you kick us off then. [00:24:06][11.8]

Bryce: [00:24:07] So for me, the time to so is when the company or the story or your thesis, mainly your investing thesis changes. Yeah. So if you go into a company with the idea that, you know, the industry is going to be growing at 10 percent because of X, Y and Z, if those reasons change and change in a way that you think is going to never negatively impact the company. That's probably a time to sell. [00:24:30][23.3]

Alec: [00:24:30] Yeah. Hundred percent, a really famous Investor David Einhorn has a role. It's the no broken thesis rule. And essentially what he tells his team is that when you buy a stock, you have an investment thesis and you have to articulate that our investment thesis to the team, regardless of what you think about the company. If that thesis is broken, you have to sell. And that's a way that he enforces discipline in his team. And we don't have to be that Zell added, or that level of adherence to the rule. But as a general rule, it is really important because what you find is you buy a company and you fall in love with the company, especially if it makes you money in the early days. You think this company is great? Everything you read about the company, if it's positive, it reinforces your view on that company. If it's negative, you find ways to justify it or rebut what that piece of information is saying. And then this thing comes into play called thesis drift. And essentially you find more and more ways to justify holding that investment away from your original thesis. So it's really important to your point, Bryce, that if you have a reason to invest in a company and that reason changes, you're not just holding the company because you think it's good, you need it. You need a solid reason to continue holding it. [00:25:46][75.4]

Bryce: [00:25:47] So Ren glad we both agree on that question then is if I have been holding the company for six months, nothing has really changed. But for some reason the market comes out and drops 10 percent in one day. Is that a time to sell? [00:26:00][13.3]

Alec: [00:26:01] If the market drops? Yeah, it is literally the worst time to sell. Why is that? Because markets overreact. [00:26:07][5.6]

Alec: [00:26:08] And if it drops 10 percent in one day, you're selling in the worst possible time when no one is interested in buying because markets are scared and people are trying to offload the stock at whatever price because they're trying to get out. When people are fearful, that is the worst time to sell what you wanted. If that happens and it will happen in your investing career, you want to just ride it out. Generally, if you're right about the company, if your thesis is right and they are a good company that is worthy of being invested in, then whatever people are freaking out about in the short term will pass. You know, if if you're wrong about the company like I was wrong about Slater and Gordon, then you might lose some more money. [00:26:48][40.2]

Bryce: [00:26:49] Yeah. Yeah. So really important to remember that because it is very and I'll admit it is very, very, very hard to do is to not sell when your stock that you once loved. And I have a classic example. I bought Bellamy's at five dollars. It rocketed up to fifteen dollars and I thought I was the best investor in the world. Then out of nowhere, this thing gets slammed and drops down to 40 or. I think it was I freaked out and I thought this thing's going to just keep dropping. I sold it at four dollars, so I sold it for a loss. And then would you believe it? Ren it rebounds back up to about fifteen dollars over the next three months. If I had just held out have offered it X percentage, but no. I took a loss because I got too emotional about it. Forgot the rule of don't sell if it just drops out of nowhere. And look at me now. I'm kicking myself for not holding onto that trade. So I've really learnt from that lesson. Take away the emotion as much as you can. If it drops, it drops. Hang on. Yeah. Unless obviously your thesis has changed. [00:27:52][63.9]

Alec: [00:27:53] Yeah. Now, there's two other common reasons that people will sell, and I'm interested to hear your thoughts on both of them. We may or may not agree on them. Okay, so first one is tax loss harvesting. Yeah. Like selling for tax reasons. Yeah. What do you think about that? [00:28:08][15.3]

Bryce: [00:28:09] It's a very common practise and it's all about rebalancing of the portfolio. I think it's not something that I generally do. People do it with larger sums of money because if you can write off. But sorry, I'll say that they do it in conjunction with the sale of some capital gains so that those losses, I guess, negate some of the capital gains tax that you have to pay. So I understand the approach, but not something that's in my. [00:28:35][25.7]

Alec: [00:28:35] Yeah. So. So essentially, you know, if you made 100 bucks on a stock and you don't wanna pay tax on that, you also sell stocks. You've lost money on to that same amount. Yeah, yeah, yeah. [00:28:45][9.3]

Alec: [00:28:45] I think it makes sense for more sophisticated investment managers. But I think at this stage, for me at least, if I still believe in a company, I still believe in a company. And I think Warren Buffett in one of his letters, or maybe he said it at one of the Berkshire Hathaway meetings, he said, We love the fact that we have to pay tax. It means that we've made a good investment. We're not scared of paying tax. And I think that people shouldn't be there. If there's a way to minimise it, then by all means, as long as it's legal. But just taxes in the end. Well, I agree. They rather keep the capital gains. Yeah. Singing on second reason to sell the people often give is to take your profits when you've made money. What do you think about that? [00:29:28][43.4]

Bryce: [00:29:30] If your goal is to have made X amount of profit and you know that your exit point is going to be once you make 20 percent because you want to use the money for other things, then by all means take the profits. Great. But I think to the point that where we talk about if the thesis hasn't changed and you're making money, then there's probably a likelihood that you're going to continue to make money and you don't want to minimise your upside just so that you can take 20 percent profit. Like you might take 20 percent now, but in four or five years time, that might be 200 percent. If that company continues to perform the way it did when you first invested into it. So as tempting as it is and we have friends and we've probably both done the same, taken profits just because we want to lock it in, we think things might happen. But many times there are stories of what could have been. Yeah. [00:30:17][47.3]

Alec: [00:30:18] Yeah. I think the big thing for investors is that you hit big, big, big wins like, you know, stocks that make 10 times their money, stocks that make 100 times their money. Not that often. Yeah. But when you do the big returns, obviously, you don't want to cut those short and you don't want to minimise their impact on your overall wealth. I guess your overall portfolio. And so be very reluctant to take profits unless there is a better investing option out there more and unless the investing thesis has changed. [00:30:53][35.0]

Alec: [00:30:53] Markets are generally willing to overpay a lot longer than you would expect. And markets are generally willing to pay a lot more than you would expect. Yeah, I mean, so many times with A2 milk, I've thought, geez, it's expensive but keeps on going. [00:31:07][13.6]

Bryce: [00:31:07] Keeps on going. Yeah. [00:31:08][0.7]

Bryce: [00:31:10] Yeah. Fascinating story. Well Ren always good to chat stocks and markets. I hope that we've been able to shed some light on some of the basics around buying and selling shares through your broker. We discussed some of the order types and also, I guess, really just how to place an order and what to consider when you do. And then some of the things to consider about buying and also about around selling your stocks as well. [00:31:31][21.7]

Alec: [00:31:32] I think to finish with something we hear in a lot of the interviews we do on our investing podcast is people just saying they wish they'd never sold. Yeah, yeah, yeah. So don't feel like you have to sell. Yeah. Yeah. [00:31:44][11.8]

Bryce: [00:31:45] Nice. Good. Closing statement Ren. As I said, always good to be talking. Stocks and finance with you. Looking forward to our next episode. Can't wait. [00:31:52][7.4]

[00:31:54] Thanks for listening to get started investing. A production of acclimates media. Please remember that everything you hear and get started investing is general advice. [00:32:01][7.4]

[00:32:02] Only the content has been prepared without knowing your personal objectives, specific financial circumstances or goals. The host of Get Started Investing may maintain positions in the companies discussed before considering any investment. Please read the product disclosure statement and consider speaking to a licenced financial. [00:32:02][0.0]


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